Asheville, North Carolina, was once widely considered a climate haven thanks to its elevated, inland location and cooler temperatures than much of the Southeast. Then came the catastrophic floods of Hurricane Helene in September 2024.It was a stark reminder that nowhere is safe from climate-worsened extreme weather risks: Hurricanes arriving from the Gulf of Mexico and Atlantic seaboard. Hail in the Midwest. Floods in the East. Sea level rise along the coasts. Wildfires in the West, most recently exemplified by the devastating and costly fires around Los Angeles.
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And worsening extreme weather translates into more expensive property damages, growing insurance claims, and rising insurance rates. Somebody has to pay for the costs to repair, rebuild, and replace damaged homes and vehicles, but with insurance companies raising rates and dropping customers, the situation is quickly threatening to trigger an insurance crisis.
Despite rapidly rising policy rates, the homeowner’s insurance market lost money in 18 states in 2023. As a recent Senate Budget Committee staff report concluded, climate-worsened extreme weather is “destabilizing insurance markets.”
And the problem extends beyond insurance policy costs.
“If home values fall, governments take in less tax revenue. That means less money for schools and police,” said New York Times climate change reporter Christopher Flavelle on The Daily podcast. “Maybe instead of climate change wrecking communities in the form of a big storm or a wildfire or a flood, maybe even before those things happen, climate change can wreck communities by something as seemingly mundane and even boring as insurance.”
There are no easy solutions to the problem, but there are measures individuals and governments can take to reduce risks and try to avert a widespread insurance crisis.
Insurance rates rising everywhere, especially in areas of high risk
Insurance generally operates by pooling risks. Most property owners buy home and vehicle insurance policies, and from that large pool of customers, insurance companies only have to make payouts to the few who experience costly damages. When climate change increases the frequency and intensity of disasters, insurance companies will spread the costs across the customer pool in the form of higher rates.
So even if you haven’t been directly harmed by extreme weather, you’re paying for some of the costs of those climate-worsened disasters. According to realtor.com, average U.S. home insurance rates rose nearly 34% from 2018 to 2023 – and over 11% in 2023 alone.
Some of those higher prices are related to rising inflation because repairing damaged homes has become more costly. But both home and auto insurance rates have consistently risen much faster than the rate of inflation over the past 15 years.
How much faster than in